Part I An Overview

The state role in financing elementary and secondary education is

of major importance for the nation's Governors. The Governors are aware

that rising education costs, requirements for equal educational opportunity, and accelerating needs for other local services have combined to render the education financing schemes of many states unworkable.

Recent state and federal court decisions have dramatized the education finance dilemma. Since August 1971, state courts in Arizona, California, and New Jersey, and federal district courts in Texas and Minnesota have declared unconstitutional financing schemes which allow interlocal disparities in property-based wealth to be reflected in unequal educational opportunity.

These events have placed the issue of education finance reform squarely upon state government, for there is clear consensus that education is and should continue to be a state responsibility.

Recent national studies reflect this consensus. Reports of the Advisory Commission on Intergovernmental Relations, the National Education Finance Project, and the President's Commission on School Finance all underscore the primacy of state government in education; particularly in the provision of adequate and equitable financing.

The suddenness with which the school finance issue has been thrust into the public eye, together with its inherent complexity, has created confusion as to the effect of judicial action upon state financing schemes. The court decisions have ruled invalid those education finance systems which make a child's educational opportunity dependent upon the greater or lesser wealth of his school district relative to other districts in the state.

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While the decisions have invalidated property tax based financing schemes in fivè states, they have not declared the property tax an invalid source of revenue for education. Nor have they held that an equal amount of money must be spent on each pupil in a state. Finally, the courts have, so far, refrained from directing that a particular system replace those which have been invalidated.

The property tax may continue as a revenue source for education and
What must be changed is the method

may be collected locally or statewide.

in which its proceeds, and the proceeds from other sources are allocated among school districts.

Furthermore, the court decisions suggest that equal educational opportunity need not, indeed ought not, be defined in terms of equal dollar expenditures per student. They suggest that per pupil expenditures geared to different levels of educational need and locational differences in unit costs would not violate the equal opportunity principle.

Within the context of these decisions, the options for state action are many. They range from minor adjustments in equalization formulas for some states to major changes in the state-local taxing system for others. It is clear that no single solution will be appropriate for all states, and the preservation of a wide array of alternatives is critically

important.

Confusion has also resulted from the close relationship between school finance reform and property tax relief.

There is consensus that

equalization of opportunity will raise total educational expenditures significantly. The revenue devices used to meet these new needs, however, will depend upon many factors and will vary greatly from state to

state.

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While each alternative for financing education is likely to have

some impact upon property tax burden, the extent to which relief from that burden becomes an objective will depend upon the fiscal circumstances of each state. The revenues needed to equalize educational opportunity and the revenue devices available to raise them will determine whether property tax relief can be achieved as a consequence of education finance reform.

Presently, only a small number of states have experienced judicial action requiring a new education financing scheme. However, it is likely that most will soon need to respond to the issue. In May 1972, thirtyfour states faced court challenges based upon either state or U.S. constitutional guarantees of equal protection; and the Texas school case, Rodriguez v. San Antonio Independent School District was under appeal to the United States Supreme Court. Whether judicial action is accomplished on a state-by-state basis or through a U.S. Supreme Court decision, the

states must clearly move rapidly toward more equitable school financing systems.